Dimension Data takeover favours foreigners

A Sh264 million deal involving Dimension Data and the Japanese technology giant, Nippon Telegraph and Telephone Corporation (NTT) is expected to further tip the balance of power in the Kenyan ICT market in favour of international investors.

The deal, which should close in October, will see the exit of South African owned Dimension Data, and the entry of another Asian company to the vibrant ICT sector.

“The combined companies will hold a strong competitive position serving global corporations’ moving to managed infrastructure services and cloud computing. The alliance will also allow Dimension Data to accelerate the execution of our medium and long-term strategy at a rapid pace,” said Jeremy Ord, Executive Chairman, Dimension Data.

NTT takes over Dimension’s Sh1 billion Kenyan operation that has carved a niche in the services market and which had started to make inroads into the nascent cloud computing sector.

Besides unlocking the growth of new technologies such as cloud computing in the region, NTT’s entry also highlights an on-going struggle between Asian and South African firms to establish firm footholds in the regional market.

A series of quiet acquisitions and the entry of new investors has tipped the scales of power in the ICT sector in favour of Asian and South African firms over the last five years.

Analysts point to the capital intensive nature of the industry as a contributing factor to dwindling Kenyan market ownership.

The growing influence of Asian firms in Kenyan business landscape has drastically tipped investment in-flows on ICT products in favour of new players from the East.

Other Asian firms that have recently increased their influence in the sector include the Indian-owned Bharti and Essar Telecoms, who have both invested in the fast-growing mobile segments.

Both firms have poured over $20 billion into the country’s mobile sector in the last year.

But analysts note that the tectonic shifts taking place in the industry are not just affecting the more visible mobile telecommunications sector.

Infrastructure deals and back office functions are increasingly becoming attractive for foreign investors as they seek to be in a position to power the anticipated growth in the ICT sector at large.

A few years ago, the aggressive entry of Huawei — a Chinese infrastructure provider — into the telecommunications infrastructure space heralded the shrinking market share of companies such as Ericsson and Alcatel-Lucent in the region.

Mahindra Satyam, a information technology services company, delivering consulting, systems integration and outsourcing solutions to clients in numerous industries across the globe also entered the market four years ago and has quickly captured a large share of service contracts from more established European firms.